Former Owner of Trading Company Pleads Guilty to Role in Multi-Million-Dollar Fraud Scheme
|U.S. Attorney’s Office March 07, 2014|
BOSTON—The former owner of Boston Trading and Research pleaded guilty today to charges stemming from his role in an investment scheme that defrauded more than 1,000 investors out of more than $30 million.
Craig A. Karlis, 53, of Hopkinton, pleaded guilty before U.S. District Court Senior Judge Mark L. Wolf, to nine counts of wire fraud and two counts of filing false tax documents. His sentencing is scheduled for June 2, 2014 at 3:00 p.m. His business partner, Ahmet Devrim Akyil, 41, formerly of Hingham, was charged with 10 counts of wire fraud. Akyil left the United States for Turkey in 2009 and remains a fugitive.
In 2007, Karlis and Akyil founded Boston Trading and Research (BTR) and recruited customers to open accounts in order to trade their money in the foreign currency exchange (FOREX) market. By July 2008, BTR had approximately 1,200 customers and more than $35 million under management.
Karlis and Akyil made a series of misrepresentations to customers about how BTR operated and about what they were doing with their money. While they told customers that BTR was compensated based on a percentage of the customers’ trading profits, Karlis and Akyil in fact used millions of dollars from BTR customer accounts to pay business expenses, as well as their own personal expenses, such as houses, cars, and jewelry. Karlis and Akyil concealed this misappropriation from BTR’s customers on BTR’s computerized customer platform and account statements, which, contrary to Karlis and Akyil’s representations, did not show all of the trades that BTR had placed using customer money.
Karlis and Akyil also told customers that BTR employed strategies to reduce risk, including a protection in the company’s computerized trading platform that automatically shut down all trading in a customer’s account if BTR’s trading lost 30 percent of the value in that account. However, the computerized platform did not have an automatic shut-down mechanism. In fact, over the course of BTR’s existence, Akyil repeatedly ignored the 30 percent “draw-down” limits. In August and September 2008, after Karlis had left BTR, Akyil continued trading long after he had lost more than 30 percent of the customer account funds. Ultimately, this trading caused BTR to lose approximately 90 percent of their customers’ money, or more than $30 million.
Karlis filed a false 2008 tax return in which he failed to report approximately $1.3 million in income he had received from BTR during that year. Karlis also filed another false document with the IRS in which he concealed the fact that he owned a second home which he had purchased with more than $600,000 from a BTR customer account.
“The Department of Justice, along with our law enforcement and civil regulatory partners, is committed to protecting investors,” said U.S. Attorney Carmen M. Ortiz. “Especially during challenging financial times, we cannot and will not allow financial predators to mislead and take advantage of hard-working Americans.”
“Mr. Karlis chose greed over honesty,” said Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation. “By doing so, he upended the lives of approximately 1,200 people, many of whom were from Massachusetts and Florida. Others of his kind should know that our team always beats those who are not honest about their investment management.”
“IRS Criminal Investigation is committed to investigating individuals who use their corporations as personal piggy banks,” said William P. Offord, Special Agent in Charge. “High-ranking corporate officials hold positions of trust not only in their companies but also in the eyes of the public. That trust is broken when such officials abuse their power and commit crimes.”
Karlis faces up to 20 years in prison, three years of supervised release, and a $250,000 fine on each of the wire fraud charges. Karlis also faces up to three years in prison, one year of supervised release and a $100,000 fine on the charges of filing false tax documents.
The Securities and Exchange Commission, which conducted a separate parallel civil investigation and cooperated with criminal authorities, has also filed a lawsuit alleging that Karlis and Akyil defrauded investors out of millions of dollars.
U.S. Attorney Ortiz; SAC Lisi of the FBI, Boston Field Division; and SAC Offord of the IRS’s Criminal Investigations in Boston, made the announcement today. The Commodity Futures Trading Commission also cooperated with the investigation. The case is being prosecuted by Assistant U.S. Attorneys Sarah E. Walters of Ortiz’s Economic Crimes Unit and Adam J. Bookbinder of Ortiz’s Cybercrime Unit.